With the same term, interest rates of banks may vary 2.5 percent/annum, stemming from liquidity and the thirst for capital as well as the competitiveness of each group of banks.
*Liquidity is uneven, interest rate difference is large
Right from the beginning of the New Year, many banks have silently raised deposit rates compared to the time before that. At SCB, deposit rates for 6-month term reached 7.65 percent/annum (for less than 40 year-old customers) and 7.7 percent/annum for customers aged 40 years old and higher.
SCB is not an exception. According to the study of the local Newswire Bao Dau Tu, the majority of small banks that are restructuring are having exceptionally high deposit rates compared to large ones.
Specifically, with 6-month interest rates, such banks as Viet Capital Bank, GPBank, Bac A Bank, NCB, Dong A Bank, etc. have interest rates from seven percent and above, while the interest rate of this term in the group of big banks (BIDV, Vietinbank, VCB, and Agribank) is just 5.1 percent-5.3 percent/annum. In the group of medium scale banks, deposit rates for 6-month term is about 6.8 percent/annum. As such, in comparison, deposit rates of small banks, restructuring banks and leading banks are now ranging 2-2.6 percent/annum for six-month term. According to experts, this difference is thanks to liquidity, capital thirst as well as health of each different bank.
According to the analysis of the National Financial Supervisory Commission (NFSC), the liquidity of the system is plentiful but only focuses in some banks.
“The market liquidity is rather good but focuses mainly in major banks. Some small or restructuring credit organisations are still difficult in accessing this low interest rate capital flow in the interbank market so they have to maintain or increase deposit rates”, said NFSC.
The good news is that deposit rates have strong differentiation. High interest rates are inclined to small banks but do not become an interest rate race like before.
In contrast, despite low interest rate, big banks still continue to maintain deposit market share. Nghiem Xuan Thanh, Chair of Vietcombank that has the lowest deposit rates in the system now, said “In 2017, Vietcombank’s deposit rates were the lowest but had strongest growth thanks to its prestige and brand. Low input interest rates helped Vietcombank’s lending rate be lower than other credit organisations”.
According to the analysis of bank experts, the Law on amendment of credit organisations, which took effect right from the beginning of 2018, allowed banks to go bankrupt, so depositors are more prudent in selecting banks to deposit.
Therefore, large banks with strong brand are having advantages in mobilising capital, and their liquidity is increasingly abundant while small and ailing banks are facing more difficulties in mobilising capital, in spite of having struggled to find ways to boost savings rates and issue valuable papers.
However, experts also suppose that in several coming years, the possibility of bankruptcy cannot happen, so the people are still more profitable when depositing in small banks at high interest rates.
*Many banks are warned
The main reason why small and medium banks have recently raised deposit rates is to prepare for high credit growth in 2018.
According to Lawyer Truong Thanh Duc, Chair of Basico, it is reasonable for small banks to have more attractive interest rates. In order to compete fairly in mobilising deposits, the State Bank of Vietnam (SBV) should announce transparent information about ranking results and operation quality of banks so that the people will consider depositing at high or low interest rates.
The noticeable issue now is to control credit growth at reasonable level and be poured into priority sectors. In 2017, soaring credit caused banks’ profit to increase, and many banks reported trillion dong profits for the first time.
This year, the credit growth target set by the State Bank is 17 percent, but many banks expect to adjust soon thanks to business results in the first six months.
However, the pursuit of “hot” credit growth over the last period also put many banks at risks, especially when banks still have much internal instability.
At the conference on implementation of the banking sector’s tasks in 2018, State Bank Governor Dao Minh Tu said the state bank had warned 15 credit organisations about hot credit growth in some discouraged sectors.
Nguyen Duc Thanh, director of Vietnam Economic and Policy Research (VEPR) said Vietnam’s credit was around 135 percent GDP, and has nearly approached the previous instability period and may lead to risks to the financial balance of the banking sector. Therefore, the pursuit of credit growth in this period is very sensitive.
